12/14/2015

:CRISILRatings:

December04,2015
Mumbai

OmkarSpecialityChemicalsLimited

Ratingsdowngradedto'CRISILBB+/Stable/CRISILA4+'

TotalBankLoanFacilitiesRated

Rs.2550Million

LongTermRating

CRISILBB+/Stable(Downgradedfrom'CRISIL
BBB+/Negative')

ShortTermRating

CRISILA4+(Downgradedfrom'CRISILA2')
(RefertoAnnexure1forFacilitywisedetails)

CRISIL has downgraded its ratings on the bank facilities of Omkar Speciality Chemicals Ltd (OSCL, part of the
Omkargroup)to'CRISILBB+/Stable/CRISILA4+'from'CRISILBBB+/Negative/CRISILA2'.

The downgrade reflects deterioration in the Omkar group's liquidity because of largerthanexpected, capital
expenditure(capex)ofoverRs.900millionundertakenin201415(referstofinancialyear,April1toMarch31)
thecapexwaslargelyfundedthroughshorttermresources,leadingtomismatchincashflowsandtighteningof
liquidity.Furthermore,commencementofoperationsofUnit5(organicmanufacturingfacility,withatotalcapital
outlay of around Rs.750 million) has been delayed significantly on account of environmental clearance issues.
Delaysinexpectedaccrualfromthisunithavefurtherconstrainedthegroup'sliquidity.Thebanklimitutilisation
levelswerehigh,averagingover95percentforthe12monthsthroughSeptember2015.Thecurrentratioalso
deteriorated to 0.84 time as of March 2015, from 1.08 times as on March 2014. CRISIL expects the Omkar
group'sliquiditytopartiallyeaseoverthemediumterm,backedbyreductioninworkingcapitalrequirementdue
toasubstantialdropintheinventoryholdingperiodtoaround100daysasofSeptember2015,from152daysas
ofMarch2015.Thegroup'scurrentratioalsoimprovedbutremainedmoderateat1.04timesasonSeptember
2015. CRISIL believes, that the group's ability to sustain its working capital requirement, and any largerthan
expected,debtfundedcapexoverthemediumterm,willremainkeyratingsensitivityfactors.

The rating continues to reflect the Omkar group's healthy business risk profile, marked by diversified product
profile and healthy operating profitability in the speciality chemical compound business, and its above average
financialriskprofile,markedbymoderategearingandhealthydebtprotectionmetrics.Theseratingstrengthsare
partially offset by the large workingcapitalrequirements and exposure to risks related to significant forex rate
volatility.
Forarrivingatitsratings,CRISILhascombinedthebusinessandfinancialriskprofilesofOSCLanditssubsidiaries,
Urdhva Chemicals Company Pvt Ltd (UCPL), Lasa Laboratory Pvt Ltd (LLPL), Risichem Research Ltd (RRL), and
DeshChemicalsPvtLtd(DCPL).Thisisbecausealltheseentities,togetherreferredtoastheOmkargroup,arein
thesamelineofbusinessandhavecommonpromotersandsignificantfungiblecashflowsamongthem.
Outlook:Stable
CRISILbelievestheOmkargroupwillbenefitoverthemediumtermfromitsdiversifiedandestablishedproduct
profile. The outlook may be revised to 'Positive' if liquidity improves backed by prudent working capital
management or any large equity infusion, or if the group successfully stabilises new capacities. Conversely, the
outlookmayberevisedto'Negative'ifliquidityweakensonaccountofanyfurtherstretchinworkingcapitalcycle,
orincaseofalargerthanexpected,debtfundedcapexordelaysinstabilisationofnewcapacities.
AbouttheGroup
OSCL, set up in 1983, manufactures speciality chemicals, organic and inorganic chemicals, and inorganic
intermediatessuchasiodine,selenium,molybdenum,andtheirderivatives.Thecompany'smanagingdirector,Mr.
Pravin Herlekar, has nearly 35 years of experience in the speciality chemicals business. The company
manufacturesawiderangeofproductsforanestablishedclientele,includingDr.Reddy'sLaboratoriesLtd,Cipla
Ltd, Biocon Ltd (rated 'CRISIL AA+/Stable/CRISIL A1+'), Asahi India Glass Ltd, Jubilant Organosys Ltd, Cadila
HealthcareLtd(rated'CRISILAA+/Stable/CRISILA1+'),andLupinLtd.Thecompanyhassubsequentlyacquireda
100percentstakeinUCPL,DCPL,andLLPL.OSCLalsohasa99percentstakeinRRL.

TheOmkargroup'sconsolidatedprofitaftertax(PAT)rosetoRs.242.8milliononanoperatingincomeofRs.2.65
billionin201415,fromaPATofRs.135.6milliononanoperatingincomeofRs.2.41billionin201314.Thegroup
achieved a PAT of Rs.171.8 million on an operating income of Rs.1.92 billion for the six months through
September2015.
Annexure1Detailsofvariousbankfacilities
Currentfacilities

Previousfacilities

Facility

Amount
(Rs.Million)

Rating

Facility

Amount
(Rs.Million)

Rating

CashCredit

710

CRISIL
BB+/Stable

CashCredit

710

CRISIL
BBB+/Negative

https://www.crisil.com/Ratings/RatingList/RatingDocs/Omkar_Speciality_Chemicals_Limited_December_04_2015_RR.html

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12/14/2015

:CRISILRatings:

External
Commercial
Borrowings
LetterofCredit

367

CRISIL
BB+/Stable

External
Commercial
Borrowings

367

CRISIL
BBB+/Negative

600

CRISILA4+

LetterofCredit

600

CRISILA2

849

CRISIL
BBB+/Negative

ProposedLong
TermBankLoan
Facility

863

CRISIL
BB+/Stable

ProposedLong
TermBankLoan
Facility

TermLoan

10

CRISIL
BB+/Stable

TermLoan

24

CRISIL
BBB+/Negative

Total

2550

Total

2550

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